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Counties using additional Treasury funds on salaries
The National Treasury building in Nairobi. Treasury’s borrowings from the Central Bank of Kenya (CBK) emergency kit have hit an all-time high of Sh107.5 billion.
Counties are using nearly all the additional funds they get from the Treasury every year to pay salaries, eroding the impact of equitable share of revenues that ought to better services.
Over the five years to June 2024, equitable share of revenues from the Treasury to counties rose from Sh314 billion to Sh354.6 billion. During the same period, the 47 counties’ wage bill rose from Sh163.4 billion to Sh215 billion.
Counties’ wage bill rose at a rate nearly thrice the jump in the rate of equitable share increments over the past five years, crowding out other critical services the money from national government is meant to fund.
The equitable share of revenues from the national government is meant to fund services in health, agriculture, poverty reduction, rural and urban services, to better livelihoods of county residents.
Parliamentary Budget Office (PBO) says the unchecked rise in salaries paid by counties against limited resources they have been getting from the national government is a fiscal risk, at a time counties have continued to accumulate pending bills.
“A large part of the annual increase in equitable share and other revenues to counties goes to defray recurrent expenditures such as salaries and wages, leaving very limited fiscal room for development spending,” the PBO notes in a report on the 2025 budget policy statement (BPS).
Several audits have raised concerns over counties’ heavy spending on salaries while they continue hiring workers, often without following legal processes.
The 2023/24 Controller of Budget (CoB) report shows that the 47 counties used Sh208.8 billion out of the Sh446.7 billion they spent during the year on personnel emoluments.
The spending on personnel emoluments during the year was 46.7 percent of counties’ total expenditure, which was a breach of the law requiring that not more than 35 percent of counties’ expenditure to be on salaries and allowances.
Over the six months to December 2024, counties spent Sh103.2 billion out of the total spending of Sh184.8 billion to pay workers. This was more than half (55.8 percent) spending on employees, in breach of the law capping the spending at 35 percent.
“The government does not provide a framework for how it intends to address this challenge, which continues to rise,” the PBO notes.
The PBO has advised the government to formulate a policy that forces counties to channel additional funds they get to services, rather than the current case where they are prioritising salaries.
The office notes that counties have perfected the habit of allocating more than 30 percent of their budgets on development at the start of the fiscal year to get approvals, only to deviate from plans and end up spending meagre resources on projects.
“The government should also develop policies to tighten up the employment uncertainties in county governments,” it said.
